Real estate market: There has to be a "ceiling" doesn't there?

[Martinjmpr]

What actually got me to thinking about this was a news report I saw last night about how resort towns like Frisco were having difficulty finding places for their service industry employees to live. With the popularity of Air B&B and VRBO, small apartments and condos are being bought as "investments" and the supply of affordable housing has diminished to almost nothing. Meanwhile businesses are struggling to stay open with the diminishing number of employees able to work there.

And it sounds harsh, but part of me is thinking "isn't this a self-correcting problem?" I mean, at some point, aren't businesses going to have to start shutting down in these towns if they can't find employees to work there? They're either have to start paying people enough money to afford to live there - which will be passed on to customers in the form of higher prices - or the businesses start shutting down and pretty soon nobody wants to visit because there's no place to buy a cup of coffee or a decent meal.

[Irving]

A lot of our friends have recently moved and we know some real estate agents that confirm their experiences. There are large companies buying houses as investment properties for rentals. They will beat any price on a house just to get it. None of the people we know went with their offer though because it's shitty for the rest of the street and because they of course will have the most strict demands for repairs.

My wife thinks we're moving backwards because we aren't moving like everyone else, but I don't really want to buy a house in this market. I have a LOT of equity in my house ($300k ish), but I'd rather wait till a crash.

The real estate agents have been saying it's standard for houses to go 18-20% over list price, and that's all the way up well into the millions of dollars for the property. Generally that market is much slower, but that doesn't seem to be the case nor. Anyway, the problem is that if you're gong to end up paying 40k over asking, then you can't get a deal by buying a house that needs work because all your extra money to do the work just went out the window. It's a problem.

[Martinjmpr]

I make less money than my counterparts who live and work in Wyoming.

Apparently there are more jobs than people in Wyoming so unless they are well compensated it is difficult to retain people.

And, yes, I have considered moving. Higher pay, lower cost or living, and no state income tax sounds like a win to me.

Interesting, what industry?

I went to school in WY and one of the biggest problems when I was there was that the jobs in WY offered such crap pay that most UW graduates had to go out of state to work. Even if I had wanted to stay in WY, there just weren't enough jobs and the ones that were available had crazy low salaries, barely enough to get by (while housing costs in WY can be low, prices for almost everything else are higher than in the rest of the country due to the fact that, like Alaska, almost everything has to be brought in from somewhere else.)

When I graduated from law school I didn't even try to find work in WY. Unless I wanted to hang my own shingle, there just wasn't enough work there. And this was in 2005 when oil and gas were booming.

The boom-and-bust cycle economy in WY doesn't help either (although I'm sure it's been a benefit to the meth and prostitution sectors .)

[Martinjmpr]

The sub-prime mortgage crash of 2007 - 2008 pretty much hit the lower end of the real estate market. From what I recall, it was mostly houses in the $300k and lower range that were most likely to fall victim to foreclosure.

In any case it seems to me we are in a "bubble" right now and it's only a matter of time before the bubble bursts. When it does, the last ones to buy (at the highest prices) are going to be the ones that lost the most.

[Martinjmpr]

A lot of our friends have recently moved and we know some real estate agents that confirm their experiences. There are large companies buying houses as investment properties for rentals. They will beat any price on a house just to get it.

I've heard the same thing but it still begs the question, if companies are buying these to rent out, who is renting them? On FB marketplace I see 3br/2ba 2 story suburban homes for rent in the $2500 - $4000 range, which seems nuts to me. If you've got $2500/month to spend on housing, why on earth would you rent?

And yes, I know people do it, but again, it just doesn't seem to be sustainable to me.

What am I missing?

[Grant H.]

I'll have to see if I can find the article again, but they were talking about corporations buying housing at inflated prices. Almost to the point of not caring what they pay "over market"...

They then went into speculation as to why, but they had sales numbers that showed lots of RE transactions to corps.

Couple of thoughts that I have had since seeing that are:

Inflation "shelter" - hedges cash against shit interest rates, since property in general keeps up with inflation.
Tax shelter - depreciable assets instead of cash. It can also be viewed as a way to hedge against uncle joe and his cronies raising corp taxes.
Rental - potential to take advantage of high rental rates

[Gman]

What you're missing is the down payment. People may have the monthly rent but also no savings. You also have people with an income and bad credit.

[Irving]

Well multiple families, or single individuals can cover that rent easier. While everything you see in the news makes everything seem common, I don't know how common multiple families in a single family home is.

[Little Dutch]

It's insane out here. The neighborhood we are looking at is selling for 35-50 percent higher than 2015. Which seems to be the last time most of these sold.
Both of the ones we liked enough to bid on sold for 40-50k over asking. One of them I know was a cash sale.
A friend out in black forest took 720k for his place, cash offer. I called him a fool for taking the third offer. He was thrilled because it was 11k over. He should have waited the 3 days.

[whitewalrus]

There are companies now allowing you to ?buy? with cash and then get a loan on the property. Im sure it?s a sweet gig for them as they are likely not out their money very long.


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